Academic journal article Journal of Economic Issues

Karl Popper's Theory of Science and Econometrics: The Rise and Decline of Social Engineering

Academic journal article Journal of Economic Issues

Karl Popper's Theory of Science and Econometrics: The Rise and Decline of Social Engineering

Article excerpt

University Press, 1970.

-----. Conjectures and Refutations. 4th ed. 1963. Reprint. London: Routledge and Kegan Paul, 1972a.

-----. The Logic of Scientific Discovery. 6th ed. 1959. Reprint. London: Hutchinson, 1972b.

-----. "Autobiography of Karl Popper." In The Philosophy of Karl Popper, edited by Paul Arthur Schilpp, vol. 1, 3-181. La Salle, Ill.: Open Court, 1974a.

Karl Popper is, in general, best known for his Logik der Forschung, translated into English in 1959 as The Logic of Scientific Discovery |1972b~, an antipositivist work that, ironically, first appeared in 1934 as one of the Vienna Circle Schriften. It is there that he first developed his falsification thesis--that component of Popper's theory of science that has held sway over economists and social scientists in the second half of the twentieth century. Although Terence Hutchison first introduced economists to Karl Popper's ideas in 1938 in his Significance and Basic Postulates of Economic Theory, Popper seems to have been far more influential in econometrics than in any other field in economics. Popper gave the new field its animus; but, unlike developments in other fields, his ideas were integrated into economic theory without reference to him or his works. Consequently, Poppers influence on econometrics has gone virtually unnoticed. A similar fate has befallen the early econometricians' dreams (inspired by Popper's philosophy of science) of developing a tool of social engineering for the betterment of society.

In this essay, I will develop the thesis that Popper's theory of falsification has had a major impact on the early development of macroeconomics, that the long-term impact has, unfortunately, not been particularly productive, and that tracing this development helps to explain much of the current rumblings in beth econometrics and macroeconomics. Because the economic literature has spawned a myriad of myths about Popper's theory of science, I will first review Popper's theories of natural and social science and explain why falsification fails in beth branches of science before providing an account of the econometrics connection.

Popper's Philosophy of Natural Science(1)

Popper's philosophy of science--his critical rationalism--is intertwined with an attempt to build a purely deductive approach to science, with his views on theory appraisal and the growth of knowledge, and with falsification and the demarcation criterion. At a time when Marx's philosophy of history, Freud's psychology, and Alfred Adler's individual psychology were in vogue, Popper was searching for the answer to such questions as: How can we decide if a theory is correct? How can we distinguish between scientific and unscientific theories? What gives scientific theories their validity? In addition, Popper was fighting against the totalitarianism and intellectual relativism of the war era. He was and remains firmly convinced that the critical method can make the use of violence obsolete |1976, 292~.

Perhaps the most radical aspect of Popper's philosophy of science is his complete rejection of induction. "As for induction (or inductive logic, or inductive behavior, or learning by induction or by repetition or by 'instruction')," Popper tells us in his autobiography |1974a, 29~, "I assert that there is no such thing"(2) Poppers is a purely deductive philosophy, resting on the belief that the prior probability of any law must equal zero. The intuitive proof of this runs as follows. Popper argued that no matter how often one encounters white swans and only white swans, the universal statement "All swans are white" can never be confirmed as true (as the logical positivists had believed), for the future could yield a black swan. Hence, according to Popper, the prior probability of "All swans are white," as well as all other generalizations, must be zero. Still, his position on induction must be regarded as an extreme one--surpassing even the views of Hume--that is not accepted by most philosophers |cf. …

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